New Delhi: RBI Governor Shaktikanta Das on Wednesday said that the economic recovery is still not well entrenched and that the central bank is “battle ready” to take appropriate measures to support growth.
Addressing a virtual conference organised by industry body FICCI, Das said that Gross Domestic Product (GDP) data released by the government was a “reflection of the ravages of the COVID-19”.
The economy contracted 23.9 per cent during the April-June quarter on account of the strict lockdown imposed by the government towards end of March to check the spread of coronavirus infections.
“Nevertheless, high frequency indicators of agricultural activity, the purchasing managers’ index that is PMI for manufacturing and certain private estimates on unemployment point to some stabilisation of economic activity in the second quarter of the current year, while of course contractions in several other sectors are also simultaneously easing,” he said.
However, Das said that the economic recovery was not yet fully entrenched and also that the recovery is likely to be gradual.
“The recovery is, however, not yet fully entrenched and moreover, in some sectors, the uptick, which was noticed in June and July they appear to have levelled off. By all indications the recovery is likely to be gradual as efforts towards the reopening of the economy are confronted with rising infections,” he said.
At the same time, Das assured the industry that the RBI stands “battle ready” and whatever measures are required will be taken to support liquidity, growth and control price rise.
According to him, the immediate policy response to COVID-19 in the country has been to prioritise the stabilisation of the economy and support quick recovery policies for durable and sustainable high growth in the medium term post the coronavirus.
The Governor also said financial market conditions in India have eased significantly across segments in response to the front-loaded cuts in the policy repo rate and large system-wide as well as targeted infusion of liquidity by the central bank. Despite substantial increase in the borrowing programme of the government, Das said that persistently large surplus liquidity conditions have ensured non-disruptive mobilisation of resources at the lowest borrowing costs in a decade.
Currently, government paper borrowing rates are the lowest in the last 10 years, he added.
Moreover, Das said that benign financing conditions and the substantial narrowing of spreads have spurred a record issuance of corporate bonds of close to Rs 3.2 lakh crore during 2020-21 up to August.
Regarding loan restructuring scheme, the RBI chief said he would look into the suggestions of the industry.
Interests of depositors and financial stability were kept in mind while framing the loan restructuring scheme, he said, adding that it had to be careful and a balanced decision on the part of the RBI.
Terming tourism as an engine of growth, the RBI Governor said although the sector is severely impacted by COVID-19, this is a sector where pent up demand could drive a V shaped recovery when the situation normalises.
He also said that COVID-19 has brought the importance of food security and food distribution or supply chain network to the forefront of public policy debate in India.